When did you last give out information about an unsuccessful bidder to another unsuccessful bidder? Never…right? But unfortunately it’s more than likely that you have…
If you are a public sector regulated organisation that regularly uses a MEAT (Most Economically Advantageous Tender) formula – one that uses the cheapest bid to determine the price score of other bidders – and you follow the Public Contract Regulations’ standstill letter rules, then you might be giving out more information in your debrief letters than perhaps you should.
Here is a simplified example which reflects a common approach taken by many organisations; there are two criteria: price and technical, weighted 60% and 40% respectively. The price score is determined using the cheapest score divided by each bidder’s score multiplied by 60. The technical score is marked out of 40. There are three bidders and they know who their competition is as a result of the outcome of the PQQ stage. They submit their bids and Bidder A wins the competition.
Let’s have a look at this from Bidder B’s perspective. Bidder B receives the standstill letter and reads the debrief information. They scored 25 marks out of 40 for technical, in comparison to Bidder A who achieved full marks for technical. In relation to price, Bidder B scored 40 out of 60 for price, whereas Bidder A scored 50 out of 60. So Bidder A wasn’t the cheapest and neither was Bidder B.
The price of Bidder A will become available when the contract notice is published, but interestingly both Bidders A and B can calculate the price of Bidder C as follows:
Bidder B’s price was worth 40/60 points and submitted at £30M.
Applying the formula from the ITT and using the numbers Bidder B knows: 40/60 = Bidder C/£30M, therefore Bidder C’s price is £20M.
Now we understand the value of Bidder C’s bid, Bidder B can also calculate Bidder A’s price.
50/60 points = £20M/Bidder A, therefore Bidder A’s price is £24M.
Let’s have a look at the scenario from Bidder C’s perspective.
Bidder C’s price was worth 60/60 points and submitted at £20M.
Bidder A’s price was scored at 50/60 points and hence worth £24M.
Bidder C cannot work out what was scored by Bidder B.
So, this is great for Bidder A, who won the contract; and Bidder B has gained some market intelligence. Not so good for Bidder C. Bidder C’s price has been unwittingly disclosed to Bidders A and B.
Given the requirement to maintain sensitive pricing information as confidential, there may be grounds for complaint and potentially even damages. I’m not a lawyer but this certainly poses a risk. In conclusion, consider how the use of the cheapest bid to determine the price score of other bidders can be reverse-engineered to gain market intelligence.